BILL ANALYSIS �
AB 1874
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Date of Hearing: April 29, 2014
ASSEMBLY COMMITTEE ON WATER, PARKS AND WILDLIFE
Anthony Rendon, Chair
AB 1874 (Gonzalez) - As Amended: April 23, 2014
SUBJECT : Integrated regional water management plans: funding
SUMMARY : Requires integrated regional water management plan
(IRWMP) funding appropriated by the Legislature to the
Department of Water Resources (DWR) for a region to be passed
through directly to that region if that region is eligible for,
and has completed, a streamlined application process and
requests the funding. Specifically, this bill :
1)Requires DWR to make a streamlined IRWMP application process
available to any regional water management group (RWMG) that
either:
a) Represents a funding area made up of a single planning
area; or,
b) Represents all planning regions within a funding area if
those regions have a written agreement detailing their
proportional allocations of any funding.
1)Mandates the streamlined applications process include, among
other requirements, that the RWMG state how much funding is
being requested, what types of projects will be funded, and
how those projects comply with existing regulatory
requirements.
2)Requires DWR to award any appropriated regional funds to an
RWMG with an approved streamlined application.
3)Requires an RWMG to report back to DWR within 90 days of
receiving funding with a list of projects and then requires
quarterly reporting after that and a DWR audit at least once
every two years.
EXISTING LAW :
1)Specifies in Proposition 84, the Safe Drinking Water, Water
Quality and Supply, Flood Control, River and Coastal
Protection Bond Act of 2006 (Prop. 84), that IRWM funding
shall be allocated to each hydrologic region in the amounts
specified in that Act.
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2)Requires DWR to allocate grant funding on a competitive basis
within each hydrologic region or subregion specified in Prop.
84.
3)Specifies that DWR shall defer to approved local project
selection and review projects only for consistency with the
purposes of the Prop. 84 IRWM section.
FISCAL EFFECT : Unknown
COMMENTS : This bill presents a trade-off that would streamline
IRWM funding to qualifying regions but remove some of the
State's oversight and accountability functions.
The last two rounds of DWR IRWM grants relied upon Prop. 84
funding and the next two rounds will as well. Those future
rounds will be guided by the urgency drought legislation SB 104
(Committee on Budget and Fiscal Review, Chapter 3, Statutes of
2014), which took effect on March 1, 2014. SB 104 appropriated
all remaining Prop. 84 IRWM funding to DWR. SB 104 provided
$200 million to DWR for an immediate IRWM "Drought Grant
Solicitation" to support projects and programs that will address
drought-related impacts. DWR issued the draft guidelines for
that solicitation April 2014. SB 104 also approved an
additional approximately $250 million for a second IRWM
solicitation, likely next year, that is not limited to drought
projects.
If this bill passed it would take effect on January 1, 2015 and
likely apply to the 2015 IRWM solicitation and any future IRWM
funding. The one exception would be if future funding was made
available in a bond act and the language of the bond act stated
otherwise. In such cases, the bond act language always
controls.
As the Little Hoover Commission June 2009 Report Bond Spending:
Expanding and Enhancing Oversight notes, a three-part
accountability system was enacted by Executive Order in November
2006 after Californians enacted the largest bond package ever
passed in the State. That system required 1) Front-end
accountability by developing a strategic plan and performance
standards for projects before spending money; 2) In-progress
accountability that documents ongoing actions needed to ensure
that infrastructure projects or other bond-funded activities
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stay within the previously identified cost and scope; and, 3)
Follow-up accountability in the form of audits to determine
whether expenditures were in line with goals laid out in the
strategic plan.
All of that accountability has not been without cost - both
literally and figuratively. It has increased administrative
functions and it has slowed repayment. Currently, the
Legislature appropriates bond funds to DWR for a competitive
IRWM grant solicitation. DWR then issues guidelines for a round
of IRWM funding and RWMGs submit their list of local projects.
DWR ranks the projects and makes the awards within each IRWM
funding region to the RWMGs. In many cases, RWMGs then contract
with their local entities that will carry out the projects.
Most projects are implemented in phases with the local entity
submitting invoices to its RWMG, who then submits the invoices
to DWR. If a problem arises, DWR raises it to the RWMG who then
raises it to the local entity. Examples of past problems have
included excessive overhead rates included in the bill or a
description of work that was performed which did not match the
agreed-upon scope of work.
It is important to note that bond funds do not immediately
create cash. General obligation bonds are a financial tool that
allows the State to borrow money in the marketplace by selling
bond instruments to investors that must then be repaid with
interest. That interest begins to accrue upon the sale of the
bonds. Therefore, the State tries to only sell the bonds in the
increments that are needed in the near future. And there are
arbitrage rules that require that even if bonds are sold and
held in an account, the account cannot earn interest.
Under this bill, as proposed, the entire amount of bond funding
that is appropriated to the State would be made available to the
qualifying RWMG. It is unclear if that means the bond funds
must be sold by the State and the entire amount made available
to the RWMG or that the State must sell the bonds in amounts
that create an adequate cash-flow to the RWMG for the contracts
it is administering. Providing up-front funding to the RWMG
makes it easier for that entity to reimburse local groups that
are implementing projects but, in effect, it delegates any
in-progress project accountability from DWR to the RWMG.
Also, if DWR is unable to withhold any funding from the RWMG, it
is unclear how it could enforce follow-up accountability short
of an action against the RWMG who would then need to pursue
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reimbursement from the local entity.
Committee staff suggests that, as this bill moves forward, the
author consider amending it in a way that will achieve IRWM
repayment streamlining and prevent cash-flow imbalances,
particularly for small nonprofits and other non-governmental
entities (NGOs), but reduce bond debt exposure and increase bond
accountability. One alternative would be to authorize DWR to
provide 25-50% of a project grant as an advance payment to small
nonprofits and NGOs. The California Department of Parks and
Recreation, for example, has previously included the ability to
make advanced payments in their Prop. 84 project solicitation
guidelines. Another option would be to require that DWR repay
invoices within a specific time frame and, if an invoice amount
is disputed, pay any non-disputed portion pending resolution of
the disputed amount.
Supporting arguments : The author states that the purpose of
this bill is to streamline the State's administration of the
IRWM Program to address many of the ongoing administrative
issues and challenges faced at the regional and funding area
level. The author states that this bill "will require DWR to
promptly accelerate the review and reimburse invoices by
delegating the increased responsibility to the [RWMGs]." Other
supporters say the "IRWM grant application and funding process
can be quite lengthy and cumbersome" and that this bill "could
expedite the future approval and funding of IRWM projects."
REGISTERED SUPPORT / OPPOSITION :
Support
San Diego County Water Authority (sponsor)
Association of California Water Agencies
East Bay Municipal Utility District
San Diego Board of Supervisors
Santa Fe Irrigation District
Vallecitos Water District
Valley Center Municipal Water District
Vista Irrigation District
Opposition
None on file
AB 1874
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Analysis Prepared by : Tina Cannon Leahy / W., P. & W. / (916)
319-2096